WHAT TO DO: Valuing a deceased person’s estate is part of applying for probate. You must be able to estimate and report the value of an estate before you apply.
So, you must be able to evaluate their money, property, and their personal belongings.
In fact, you do not always need the legal right to deal with someone else’s property and possessions after their death.
But, when valuing the estate of someone who’s died, some of the things you will need to do include:
- Contacting certain organisations about assets and debts (e.g. banks, utility providers).
- Estimating the value of the estate and report the findings to HMRC. The outcome may also affect the deadlines for reporting and paying Inheritance Tax.
- Reporting the value and details to HM Revenue and Customs (e.g. online or by paper form). You can then find out if there is any tax to pay and when to pay it.
Note: There is a Welsh language version (Cymraeg) on valuing an estate when someone dies. You can also get further information from the Inheritance Tax and probate helpline (see below).
How Long it Takes to Value an Estate
The amount of time it takes for valuing an estate varies. Often, it will take up to six months to finalise a valuation. Large or complicated estates can take even longer (e.g. those involving a trust or taxation issues).
When there are Deadlines
In most cases, there are no ‘strict’ deadlines on valuing an estate after someone dies. But, there will be deadlines if the estate needs to pay Inheritance Tax. If so, you would need to:
- Send the Inheritance Tax forms to HM Revenue and Customs within one (1) year.
- Begin paying the tax by the end of the sixth month after the person died. But, you can make early payments even before you finish the valuation of money and property.
Getting Expert Help and Advice
Note: A solicitor can help with the tasks involved but they will charge you a fee. You can also get further help and information from the Inheritance Tax and probate helpline.
Contacting Organisations (assets and debts)
You may need to contact certain organisations to get extra help with the valuation of an estate. If you write to an organisation, they will help you to find more details on the deceased person’s:
- Assets (e.g. banks, building societies, and pension providers).
- Debts (e.g. credit card companies, mortgage lenders, and utility companies).
Note: You should include a copy of the death certificate when you write a letter. It gives you an opportunity to ask for the value of the asset or debt at the time that the person died.
Determining which Organisations to Contact
Despite being a sensitive task, you might need to search through their private papers for clues of who to contact. Other people to ask include their family, friends, and their accountant or solicitor (if they had one).
Typical examples of organisations that hold assets include:
- Banks and building societies.
- Employers (the person may be owed a salary).
- Landlords (the person may have made rental payments in advance).
- National Savings and Investments for Premium Bonds (you may need to use the free tracing service).
- Organisations that hold assets (e.g. investments or assets in a trust, ISAs, and shares).
- Pension providers (ask them whether you need to include a private pension when valuing the estate).
- Share companies (you will need to know the company details, number of shares, and share certificate number).
When you write to the bank your letter should also ask for information on whether:
- They are holding any share certificates or deeds for the person who died.
- They need to stop any direct debits or standing orders. They may need transferring if they were in joint names.
If the Deceased Person had a Mortgage
You should find out whether the mortgage lender needs any of the payments to continue. It may be necessary while you apply for probate. If so, you may need to:
- Make the payments yourself (you can reclaim them from the estate once you get probate).
- Check whether the person had a life assurance or a mortgage protection policy. If so, it should cover these types of payments.
Estimating the Value of an Estate
The main reason for estimating the estate’s value is to determine whether you need to pay Inheritance Tax. There will be no tax liabilities for the estate if (either):
- The total value is below the current threshold for Inheritance Tax.
- The full amount passes to the deceased person’s spouse (or civil partner), a charity, or a CASC (community amateur sports club).
The tax threshold could be higher in some cases. It could apply if the person who died gives away their home to their children or was widowed.
If you determine there is tax to pay, it will affect the way you report the value of the estate to HMRC. It will also affect the deadlines for reporting it and the time limits for paying the taxes.
Working Out the Gross Value of an Estimate
You will need to find an approximation of the ‘gross’ value. Adding together the assets and the gifts will give you the gross value. The purpose is to determine whether the estate owes any tax.
Note: Gifts are certain kinds of asset given away during the seven (7) years before the person died (e.g. cash).
When estimating the value of each gift, you can use (either):
- The approximate market value when the gift was first made (realistic selling price).
- The realistic selling price of the gift when the deceased no longer benefitted from it (if they benefitted from it after giving it away).
Listing the Assets
You can start off by making a list of all the assets that they owned (e.g. items with a value). In most cases, they include:
- Assets held by the types of organisations that you would have written to. Typical examples include money inside a bank account, savings investments, and pensions.
- Belongings and possessions (e.g. a car, furniture, jewellery, and property).
- Payments made to them when they died (e.g. a lump sum ‘death benefit’ from a pension or life insurance).
The next step is to approximate what the value would have been on the date that the person died. You should use the realistic selling price, such as on the open market, for each asset.
Note: It is important to include all the assets in the estimation. So, do not leave out anything left to the person’s spouse, their civil partner, or a charity. There will be no tax to pay on these assets.
How to Value Joint Assets
You will need to divide the value of the asset by two (2) for joint assets. It applies to anything jointly owned with their spouse or their civil partner.
Divide the value by the number of owners for property or land shared with others. Then, deduct 10% from the share of the person who died. Take £4,000 off the value of the whole asset before you work out their share in Scotland.
You would calculate the value based on the person’s share if they were a tenant in common (e.g. such as in joint property ownership).
Note: It is not uncommon to find some bank accounts in joint names ‘for convenience only’. An elderly person might add someone to help them manage their account, for example. Use the actual amount the person owned rather than dividing the value by the number of joint owners.
Listing the Gifts
Bank statements, and contacting family members, is a good place to start when you make a list of gifts. You need to find out about any gifts of cash, or any other assets gifted:
- During the seven (7) years before the person died if the amount totalled £3,000 or more per year. There is no need to include any exempted gifts (e.g. for birthdays or weddings).
- At any time if the beneficiary continued benefitting from the gift (e.g. living rent-free after passing on a home to them). The same would apply for gifts put into trust.
When estimating the value of each gift, you can use (either):
- The approximate market value when the gift was first made (realistic selling price).
- The realistic selling price of the gift when the deceased no longer benefitted from it (if they benefitted from it after giving it away).
Note: Recipients may need to pay Inheritance Tax on their gifts if the person gave away more than the threshold allows when they died.
Listing the Debts
There is no need to include any debts of the estate when you estimate the gross value. But, you must inform HM Revenue and Customs about the debts when reporting the value of the estate.
You may need to check for the records of any debts after the person died. In most cases this would include:
- A mortgage, loans, bank overdrafts, and credit cards.
- Liabilities such as household bills. It may also include bills for goods or services received but not yet paid for (e.g. accountant fees and building work).
Determining the Gross Value of an Estate
Adding the value of the assets to any gifts will give you the gross value figure. Even though you can ignore the debts at this stage, you can now start informing HMRC about the value of the estate.
Telling HMRC about the Value of an Estate
Before you start make sure you have:
- An estimated figure for the gross value of the estate.
- Informed the organisations that the person has died. They can provide you with accurate valuations of the deceased person’s assets and debts.
You should also work out the ‘net’ value of an estate as part of telling HMRC. The net value amount is the assets plus the gifts – minus the debts. You must be aware of the net value when applying for a Grant of Probate.
Getting Accurate Valuations
In some cases, you will need to get accurate valuations of the estate (e.g. using a professional valuer for items over £500). But, you can continue using valuation estimates if:
- The gross value of the estate is less than £250,000.
- All the estate passes over to the spouse (or civil partner) of the deceased person, a charity, or to certain organisations such as community amateur sports clubs or museums.
Once you have estimated the total value of the estate, you can:
- Start to report the estate’s value in detail to HM Revenue and Customs. You can also continue a working on a report you already started. The facility confirms whether you can report everything online or whether you need to use a paper form.
- Find out whether there will be any tax to pay and when you must pay it.
Note: You can get further help and information from the Inheritance Tax and probate helpline.
Keeping Records after Valuing an Estate
You must keep certain types of records after you value a deceased person’s estate. You will need to keep copies of:
- The will.
- Signed copies of Inheritance Tax forms and any supporting documents.
- Records that show how you worked out the value of assets in the estate (e.g. a valuation given to you by an estate agent).
- Documents that show any unused Inheritance Tax threshold that might get transferred to a surviving spouse (or civil partner).
- The final accounts.
Note: HM Revenue and Customs can ask to see records up to twenty (20) years after paying Inheritance Tax.
The Final Accounts
Final accounts should show how you distributed money, property or personal belongings from an estate. Typical examples include documents like:
- Letters from HM Revenue and Customs that confirm you paid the Inheritance Tax bill.
- Receipts that show any paid debts (e.g. bills for utilities).
- Receipts that cover the expenses for someone to deal with the estate.
- Written confirmation that all the beneficiaries (people who inherited assets) received their full share of the estate.
You should then send out copies of the final accounts to all the beneficiaries as part of finishing the valuation.